Fear swept through financial markets Thursday, and Wall Street tumbled as worries roared back to the fore that the world’s fragile economy may buckle under higher interest rates.
Switzerland’s central bank, meanwhile, raised rates for the first time in years, a half-point hike. Taiwan’s central bank raised its key rate by an eighth of a point. Japan’s central bank began a two-day meeting, though it’s held out on raising rates and making other economy-slowing moves that investors call “hawkish.”
“Another concern is that with the change in policy, there’s been weakening economic data already,” said Bill Northey, senior investment director at U.S. Bank Wealth Management. “That raises the odds of a recession in the latter part of 2022 into 2023.” Not only is the Federal Reserve hiking short-term rates, it also this month began allowing some of the trillions of dollars of bonds it purchased through the pandemic to roll off its balance sheet. That should put upward pressure on longer-term interest rates. It’s another way central banks have been ripping away supports they earlier propped underneath markets to juice the economy.
resulting directly from the Fed’s moves are digging into the industry. A separate reading on manufacturing in the mid-Atlantic region also unexpectedly fell. Big Tech stocks were among the heaviest weights on the market Thursday, but the sharpest losses hit stocks whose profits depend more on the strength of the economy and whether customers can keep up their purchases amid the highest inflation in decades.
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